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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

Commission file number

PETRO, INC.

(Exact name of the registrant as specified in its charter)

Registrant’s telephone number, including area code: (915) 860-4480

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨    No  x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of June 30, 2004, the number of shares outstanding of the registrant’s only class of common stock was 99,500.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PETRO, INC.

UNAUDITED CONDENSED BALANCE SHEETS

See accompanying notes to unaudited condensed financial statements.

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PETRO, INC.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

See accompanying notes to unaudited condensed financial statements.

2

PETRO, INC.

UNAUDITED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY (DEFICIT)

For the Six Months Ended June 30, 2004

See accompanying notes to unaudited condensed financial statements.

3

PETRO, INC.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

See accompanying notes to unaudited condensed financial statements.

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PETRO, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(1) Nature of Business

Petro, Inc. (the “Company”) owns business interests in certain oil and gas and real estate interests located in the Southwest United States. In addition, the Company owns an interest in Petro Stopping Centers Holdings, L.P. (“Holdings”), a Delaware limited partnership, which, in turn, owns an operating partnership, that operates a nationwide network of truck stopping centers. The Company is a wholly owned subsidiary of Nevada Trio, Inc.

(2) Summary of Significant Accounting Policies

The accompanying unaudited condensed financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, certain financial information has been condensed and certain footnote disclosures have been omitted. Such information and disclosures are normally included in financial statements prepared in accordance with generally accepted accounting principles.

These unaudited condensed financial statements should be read in conjunction with the December 31, 2003 financial statements and notes thereto in the Registration Statement on Form S-4A of Petro Stopping Centers, L.P. (the “Operating Partnership”) and Petro Financial Corporation, filed with the Securities Exchange Commission on June 10, 2004 (the “2003 Financial Statements”). Capitalized terms used in this report and not defined herein have the meanings ascribed to such terms in the 2003 Financial Statements. In the opinion of management of the Company, the accompanying unaudited condensed financial statements contain all adjustments necessary to present fairly the condensed financial position of the Company at December 31, 2003 and June 30, 2004, the condensed results of operations for the three and six months ended June 30, 2003 and 2004, changes in stockholder’s equity (deficit) for the six months ended June 30, 2004, and the condensed cash flows for the six months ended June 30, 2003 and 2004. The results of operations for the three and six months ended June 30, 2004 are not necessarily indicative of the results to be expected for the full calendar year.

(3) Investment in Affiliated Entities and Limited Partnership

The Company has a 20% interest in Hueco Mountain Estates, Inc. (“Hueco”), a 10% interest in Trevino Properties (“Trevino”), a .25% general partnership interest in the Operating Partnership, and a 12.5% combined general and limited partnership interest in Holdings, all of which are accounted for using the equity method. In addition, the Company holds a mandatorily redeemable preferred partnership interest in Holdings. The mandatorily redeemable preferred partnership interests are entitled to cumulative preferred returns of 8% and are subject to mandatory redemption in October 2007. The preferred returns accrue but are only payable in cash if permitted by the Operating Partnership’s then existing debt instruments.

For the three months ended June 30, 2003 and 2004, equity in net loss of affiliated entities includes losses of $5,956 related to Hueco, for both periods, and income of $4,513 for the three months ended June 30, 2003 and losses of $4,513 for the three months ended June 30, 2004 for Trevino. For the six months ended June 30, 2003 and 2004, equity in net loss of affiliated entities includes losses of $11,912 related to Hueco, for both years, and income of $9,026 for Trevino, also for both years. For the three months ended June 30, 2003 and 2004, net income (loss) on investment in limited partnership includes a loss of $140,315 and income of $180,844 related to Holdings, respectively. For the six months ended June 30, 2003 and 2004, net loss on investment in limited partnership includes $601,084 and $2,376,518 related to Holdings, respectively.

(continued)

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PETRO, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

The Company’s equity investments at December 31, 2003 and June 30, 2004 are summarized below:

(4) Financial Results and Liquidity

For the three months ended June 30, 2003 and 2004, the Company incurred a net loss of $153,608 and net income of $182,797, respectively, and incurred net losses of $654,147 and $2,368,625 for the six months ended June 30, 2003 and 2004, respectively. Despite these losses, the Company was able to secure operating capital from affiliates. The affiliates have indicated their commitment to provide additional funding for the Company sufficient to satisfy current and future obligations, on an as-needed basis, at least through June 30, 2005.

(5) Commitments and Contingencies

The Company is involved in various litigation incidental to its business for which an estimate of the possible loss or range of loss cannot be made at this time. In the opinion of management, such proceedings will not have a material adverse effect on the Company’s financial position or results of operations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is qualified in its entirety by the more detailed information regarding Petro, Inc. (the “Company”) in the Form S-4A Registration Statement of Petro Stopping Centers, L.P. and Petro Financial Corporation, as filed with the Securities Exchange Commission on June 10, 2004 and the condensed financial statements contained in this report, including the notes thereto.

Certain sections of this Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures about Market Risk,” contain various forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which represent our expectations or beliefs concerning future events that involve risks and uncertainties. These statements may be accompanied by words such as “believe,” “intend,” “estimate,” “may,” “could,” “project,” “anticipate,” or “predict,” that convey the uncertainty of future events or outcomes. These statements are based on assumptions that we believe are reasonable; however, many important factors could cause our actual results in the future to differ materially from the results referred to in the forward-looking statements. In addition to the factors described in this Form 10-Q, important factors that could cause our actual results to differ materially from the results referred to in the forward-looking statements include, among others, the following:

All statements, other than statements of historical facts included in this Form 10-Q, may be considered forward-looking statements. The forward-looking statements are included in, without limitation, “—Transactions with Related-Parties,” “—Liquidity and Capital Resources,” “—Off-Balance Sheet Arrangements,” “—Results of Operations,” and “—Critical Accounting Policies”. In addition, in the preparation of the financial statements, we make various estimates and assumptions that are by their nature forward-looking statements.

Reporting Format

We own investments in certain oil and gas operations, real estate joint ventures, and our interest in Petro Stopping Centers Holdings, L.P. (“Holdings”) and its related entities. We do not have any employees; we do not own any assets other than the investments in these entities; and, apart from our general partnership interests, we are not otherwise actively engaged in any business.

We have owned a small working interest in two oil and gas wells for over 20 years. Revenues are netted against expenses and are expected to continue to decline year over year. We own approximately 20% of the common stock of Hueco Mountain Estates, Inc. (“Hueco”). Hueco sells land in west Texas for residential use and in most instances carries the sale contract for the benefit of the purchaser. We own a 10% interest in Trevino Properties, a real estate general partnership, which holds undeveloped commercial land for sale in El Paso, Texas.

Effective July 23, 1999, Holdings was formed as a Delaware limited partnership. Certain other partners and we exchanged our interests in Petro Stopping Centers, L.P. (the “Operating Partnership”) for identical interests in Holdings (the “Recapitalization”). As a result of the Recapitalization, we became the sole general partner in both Holdings (1.1%) and the Operating Partnership (0.25%). In addition, we hold an 11% common limited partnership interest in Holdings and a mandatorily redeemable preferred partnership interest. These preferred partnership interests are entitled to cumulative preferred returns of 8% and are subject to mandatory redemption in October 2007. The preferred returns accrue but are only payable in cash if permitted by the Operating Partnership’s then existing debt instruments. At June 30, 2004, we have accrued preferred returns amounting to $1,382,000.

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We derive our revenues from:

The following table sets forth our total consolidated revenues by major source: